Thirty-five years ago Jean_Jacques Servan_Schreiber's "Le Défi Americain" (The American Challenge) claimed that Europe was in danger of becoming a branch office for American multinationals. A decade later, Japan's rising commercial challenge seemed paramount. Now China makes people nervous. But today's responses to China's economic challenge may be as misbegotten as yesterday's answers to le défi Americain .
China in 2002 resembles nothing so much as Japan in the 1960s, when it was preparing to become a global competitor, with echoes of Dickensian England and America's "robber baron" era of the late 1800s, when the US first rose to global economic power. What is unprecedented is that something similar should occur in a Communist nation, or in one with such a massive population.
The new China is symbolized by an electronics components factory in Shenzhen in the Pearl River (Zhu Jiang) Delta. When I visited it, the factory had 10,000 workers, each earning about $80 per month. All were young women. None wore eyeglasses. "Don't you have employees with bad eyesight?" I asked. The manager replied, "We fire them when their eyes go bad. They can find another job--that's not my problem." Indeed, those laid off generally do not return to peasant life, but become urban entrepreneurs in the service industries of China's new cities.
China owes its growing dynamism partly to the central authorities' shrewd pursuit of well-timed and complementary development strategies. Less noticed than the 15-year process of gaining admission to the World Trade Organization has been the stabilization of the currency, the renminbi (RMB), pegged to the Hong Kong dollar since 1997, when the territory reverted to Chinese rule. By prohibiting exchange of RMB abroad, the central authorities prevented the currency fluctuations that in recent years wreaked havoc in other developing nations.